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The Federal Trade Commission has filed a complaint in U.S. district court charging First American Payment Processing, Inc., CET Corp., and Check Processing Center, LLC, and their principals with providing assistance to fraudulent telemarketers. According to the FTC, the defendants knowingly processed electronic payments for telemarketers who deceptively sell advance-fee credit cards or who engage in other deceptive or abusive telemarketing practices. The FTC further alleges that the defendants violated the law by processing transactions through the Automated Clearing House (ACH) Network on behalf of merchants engaged in outbound telemarketing to consumers for the purpose of selling goods and services.

On January 20, 2004, the court entered a stipulated preliminary injunction order prohibiting the corporate defendants and their principals, Carl Towner and Matthew Robinson, from processing ACH debits for entities engaged in the telemarketing of credit-related goods or services; processing telephone-initiated ACH debits for entities that engage in “cold-call” outbound telemarketing; and violating the Telemarketing Sales Rule (TSR).

According to the FTC, the defendants, based in Phoenix, Arizona, provide electronic payment services to clients in the United States and Canada. The defendants process electronic debits from consumers’ bank accounts through the ACH Network, a nationwide electronic funds transfer system that provides for the rapid interbank clearing of electronic payments. According to the FTC, the defendants processed ACH transactions on behalf of numerous fraudulent outbound telemarketing operations – a number of which the FTC previously sued as advance-fee credit card scams.

The FTC’s complaint alleges that the defendants violated the TSR by providing substantial assistance and support to numerous client telemarketers whom they knew (or consciously avoided knowing) were engaged in deceptive and abusive telemarketing practices.

The FTC further alleges that the defendants assisted and facilitated at least six client telemarketers engaged in deceptively offering credit cards to consumers for an advance fee.

In addition, the complaint alleges that in providing ACH payment processing services to merchants engaged in outbound telemarketing, the defendants engaged in an unfair practice by systematically breaching their contractual promise to financial institutions to adhere to the National Automated Clearing House Association Operating Rules (NACHA Rules) governing the ACH Network. The NACHA Rules include a rule that specifically prohibits the processing of ACH transactions on behalf of merchants engaged in outbound telemarketing to consumers with whom such merchants have no existing relationship.

The Commission is seeking redress for consumers and disgorgement of fees unlawfully earned through processing for fraudulent telemarketers. The FTC’s complaint also named the principals’ spouses as relief defendants.

The Commission vote authorizing staff to file the complaint was 5-0. The complaint was filed in the U.S. District Court, District of Arizona, Phoenix Division on January 13, 2004.

NOTE: The Commission files a complaint when it has “reason to believe” that the law has been or is being violated, and it appears to the Commission that a proceeding is in the public interest. The complaint is not a finding or ruling that the defendants have actually violated the law. The case will be decided by the court.

Copies of the complaint are available from the FTC’s Web site at http://www.ftc.gov and also from the FTC’s Consumer Response Center, Room 130, 600 Pennsylvania Avenue, N.W., Washington, D.C. 20580. The FTC works for the consumer to prevent fraudulent, deceptive, and unfair business practices in the marketplace and to provide information to help consumers spot, stop, and avoid them. To file a complaint, or to get free information on any of 150 consumer topics, call toll-free, 1-877-FTC-HELP (1 877-382-4357), or use the complaint form at http://www.ftc.gov. The FTC enters Internet, telemarketing, identity theft, and other fraud-related complaints into Consumer Sentinel, a secure, online database available to hundreds of civil and criminal law enforcement agencies in the U.S. and abroad.